Fixed Rate Loans & Extra Repayments for First Home Buyers

Getting Your Foot on the Property Ladder as a Painter

If you're a painter looking to buy your first home, you've probably spent hours scrolling through property listings and wondering how you'll ever save enough for a deposit. The good news? There are plenty of home loan options designed specifically to help first home buyers like you get into the property market sooner than you think.

One of the biggest questions first home buyers face is whether to choose a fixed interest rate or variable interest rate. And once you've locked in your loan, can you still make extra repayments to pay it off faster? Let's break it down in terms that make sense for tradies in the painting industry.

Understanding Fixed Interest Rates

A fixed interest rate means your interest rate stays the same for a set period, usually between one and five years. This gives you certainty with your repayments - you'll know exactly what's coming out of your account each month, which makes budgeting much easier when you're managing fluctuating income from painting jobs.

For first home buyers, this stability can be really helpful during those first few years of homeownership when you're getting used to mortgage repayments on top of your other expenses. You won't need to worry about rate increases affecting your first home buyer budget during the fixed period.

On the flip side, a variable interest rate can go up or down depending on market conditions. While this means you could benefit from rate decreases, it also means your repayments could increase if rates go up.

The Extra Repayments Question

Here's where things get interesting for painters who might have a good month and want to throw extra cash at their mortgage. With fixed rate loans, there are usually limits on how much extra you can repay without incurring fees.

Most lenders allow you to make additional repayments up to a certain amount each year - often around $10,000 to $30,000 - before they charge break fees. If you go over this limit, you might face penalties that could outweigh the benefits of paying down your loan faster.

Why do lenders do this? When you lock in a fixed interest rate, the lender commits to that rate based on their funding costs. If you pay off a large chunk early, it disrupts their calculations and they miss out on the interest they were expecting to earn.

Redraw Facilities vs Offset Accounts

If you're planning to make extra repayments, you'll want to understand the difference between a redraw facility and an offset account.

A redraw facility lets you access any extra repayments you've made on your home loan. For example, if you've paid an additional $5,000 above your minimum repayments, you could redraw that money if you need it for a new spray gun or van repairs.

However, fixed rate loans often don't come with offset accounts. An offset account is a transaction account linked to your home loan where the balance reduces the interest you pay. While they're incredibly useful, they're typically only available with variable interest rate loans.

First Home Buyer Support You Should Know About

As a painter buying your first home, you might be eligible for several government schemes and concessions that can make homeownership more affordable:

First Home Loan Deposit Scheme: This allows eligible first home buyers to purchase a property with just a 5% deposit without paying Lenders Mortgage Insurance (LMI). The government guarantees up to 15% of the property value, which means you can get into the market sooner.

Regional First Home Buyer Guarantee: If you're looking to buy in a regional area, this scheme offers similar benefits to help you buy your first home with a smaller deposit.

First Home Owner Grants (FHOG): Depending on your state or territory, you might be eligible for first home owner grants when purchasing a new home or building.

First Home Buyer Stamp Duty Concessions: Many states offer reduced or waived stamp duty for first home buyers, which can save you thousands of dollars.

Don't forget about the First Home Super Saver Scheme either, which lets you save for your deposit inside your super fund with potential tax benefits.

Making the Right Choice for Your Situation

So should you choose a fixed or variable rate? And does it matter if you want to make extra repayments?

If you value certainty and want to know exactly what your repayments will be, a fixed interest rate might suit you well - especially if you're not planning to make large extra repayments that would exceed the annual limit.

If you're someone who gets regular bonuses from painting jobs or expects your income to increase, and you want the flexibility to pay off your loan faster without restrictions, a variable rate with an offset account might be more suitable.

Many painters actually choose a split loan - where part of your home loan is fixed and part is variable. This gives you some certainty while still allowing flexibility for extra repayments on the variable portion.

Low Deposit Options for Painters

You don't necessarily need a 20% deposit to apply for a home loan. There are several low deposit options available:

• 5% deposit: Through schemes like the First Home Loan Deposit Scheme
• 10% deposit: Many lenders offer this option, though you'll typically need to pay LMI
• Gift deposit: Some lenders accept a genuine gift from family members to help with your deposit

Understanding your borrowing capacity is crucial when planning your first home loan application. Your income as a painter, along with your expenses and any existing debts, will determine how much you can borrow.

Your First Home Buyer Checklist

Before you apply for a home loan, make sure you've got these sorted:

1. Check your first home buyer eligibility for government schemes
2. Save your deposit (remember to factor in costs beyond just the property price)
3. Gather your income documentation from your painting business
4. Review your expenses and existing debts
5. Research home loan options suitable for tradies
6. Consider getting pre-approval before you start seriously house hunting
7. Understand the difference between fixed and variable interest rates
8. Decide whether you want the ability to make extra repayments

Working with a Broker Who Understands Tradies

At Tradie Home Loans, we specialise in helping painters and other tradies get into their first homes. We understand that your income might look different from someone in a regular salary job, and we know which lenders are most supportive of self-employed tradies.

We can help you:

• Navigate first home buyer eligibility requirements
• Find lenders offering interest rate discounts for tradies
• Compare fixed and variable rate options
• Access the 5% deposit scheme and other low deposit options
• Structure your loan to allow for extra repayments if that's important to you
• Complete your first home loan application with all the right documentation

Whether you're after certainty with a fixed interest rate or flexibility with a variable rate and offset account, we'll work with you to find home loan options that fit your circumstances and goals.

Call one of our team or book an appointment at a time that works for you. We're here to help painters like you get the keys to your first home sooner.